Super 15: They fell less in selloff, gained more in rebound & own 40% of market

NEW DELHI: The challenging economic environment seems to have prompted investors to take a flight to the top 15 stocks by market capitalisation, which now account for 40 per cent of total market capitalisation of all BSE-listed companies, the highest since Global Financial Crisis of 2008.

During the March-April period, most of which was marked by the coronavirus-induced lockdown, top 15 stocks together accounted for 40 per cent of BSE’s total market value. This share stood below 30 per cent in December, 2017, and has been rising ever since.

“A flight to safety and quality has resulted in the rising concentration of market-cap in favour of mega and largecaps,” said Motilal Oswal Securities.

Data compiled from corporate database AceEquity showed top 15 stocks added Rs 8.4 lakh crore, or nearly 40 per cent of the Rs 21 lakh crore addition to the BSE market-cap since March 25, the day the government clamped the lockdown.

Sensex and Nifty each has gained 20 per cent from the lowest levels hit on March, while the midcap index increased much less at 16 per cent.

Many megacaps have rallied up to 50 per cent from their March lows. Reliance Industries has soared 52 per cent to Rs 1,435 from its March low of Rs 943. It has added Rs 3.4 lakh crore to its market-cap amid the lockdown.

Bharti Airtel has climbed 32 per cent to Rs 530-odd level from Rs 400, adding Rs 70,000 crore to its m-cap. Nestle India has jumped 29 per cent to Rs 17,400 level. HDFC Bank has gained 20 per cent from March 24 lows. HDFC Bank and Nestle together added Rs 1.24 lakh crore to their market values. Each of these four stocks has a m-cap anywhere between Rs 1.5 lakh crore and Rs 9 lakh crore.

A similar polarisation can be seen in the Nifty pack too.

“Even the Covid-19-led correction, the top 15 stocks had outperformed with a 10 per cent drop against a 26 per cent correction in the remaining 35 Nifty stocks,” said Motilal Oswal Securities.

Consensus Nifty EPS estimates for FY21 have been reduced by 13 per cent this year so far. Brokerages see an additional 18-20 per cent risk to earnings at this stage.

Kotak Securities said bigger companies have stronger balance sheets and economies of scale, which can help them sustain through the slowdown in a better way than midcap and smallcap companies.

“The impact on earnings could be higher for midcap and small companies, if the slowdown persists longer. We can expect activity in midcaps and smallcaps to pick up with a lag effect, maybe in the second phase of next rally,” the brokerage said.

Also, since the valuation gap between largecaps and midcaps has narrowed, it makes a case to be with largecaps for now, Kotak said.